China’s technology group Alibaba is leading a $ 400 million investment in the retail sector of Vietnam’s conglomerate Masan. Alibaba’s bet is on strong growth in consumer spending in a Covid-19 success story that was Vietnam.
More about the Masan-Alibaba deal
In a deal valuing Masan’s retail unit at $ 6.9 billion, Alibaba is investing a 5.5% stake in Crown X, along with Bearing Private Equity Asia and others. Although two people familiar with the deal said that Alibaba contributed “substantially more” than bearings.
This is Alibaba’s first time investing in Vietnam due to its increasing focus on the early online grocery market in Southeast Asia. Founded and chaired by Nguyen Dang Quan of Billionaire, Masan has also discussed in advance about $ 300- $ 400 million in additional strategic investments from other investors. These will be completed later this year.
Using existing distribution network
Masan Group that operates the VinMart retail chain said it plans to partner with Alibaba’s Southeast Asian e-commerce unit Lazada to build a digital presence. This agreement will give Alibaba and Lazada access to a network of over 2,000 stores. This means that companies do not have to invest to establish a distribution network in Vietnam.
More on the new trade agreements
Vietnam was one of the few Asian economies to flourish during the pandemic. It has agreed to Trans-Pacific and EU free trade agreements. Marking its location onto China’s doorstep has given it a spotlight. Vietnam is attracting foreign investment at a time of Sino-US trade tensions.
Andy Ho, chief investment officer at VinaCapital, a Ho Chi Minh City-based investment manager said, “I think this is good news for Vietnam and reflects continuing foreign interest in the country, particularly in the consumer product and distribution spaces. Clearly, Vietnamese consumers are getting wealthier and wealthier as GDP continues to grow, even in 2020.”
Since acquiring Lazada in 2018, this deal is Alibaba’s biggest yet. But Lazada is falling behind regional rival, Tencent backed, Shopee. This suggests that Alibaba will not completely dial back its international investments. The Vietnam deal is a “land grab” by Alibaba and Lazada, said Angus Mackintosh, founder of CrossASEAN Research. About the Shopee incident he said, “But online groceries is an underexplored space and a very underdeveloped vertical in Vietnam. It is a good population story, with a lot of young, tech-savvy people.”